Another report – this time the Securitization Weekly Overview from Bank of America-Merrill Lynch (BAC) – is forecasting a shift away from single-family home purchases to a rental market.

Granted, this is not the first time a report predicting multifamily growth has hit in the past few months, but it does reiterate a common theme – investors are betting on multifamily more often.

Just last week, HousingWire reported that more younger Americans are expected to pile into the multifamily market after spending years in their parents houses or sharing apartments with roommates.

Sponsor Content

But this younger crowd, while keen on homeownership, apparently lacks the momentum, due to job constraints and a general inability to obtain a mortgage.

It’s something Chris Flanagan, MBS/ABS Strategist with Bank of America-Merrill Lynch and MBS Strategist Justin Borst also recognized in their newly published research.

"The December housing starts report provided some confirmation of the theme we discussed last week, which was that it appears as if a structural shift away from getting a mortgage and buying a single-family home to just being a renter is underway," the pair said.

Such a transition is expected to subdue the possibility of dramatic changes in the single-family mortgage-backed securities market.

Flanagan and Borst note that "this shift should work to keep supply of single-family MBS at what may be surprisingly low levels well into the future. We also noted that we think this shift gives the Fed ample cover to taper its MBS purchases without much impact to mortgage rates, since gross supply of MBS may be shrinking more quickly than the Fed plans to taper."

When comparing multifamily production today to the pre-housing crisis era, it is clear a major shift is taking place. BofA-Merrill Lynch notes that pre-crisis, the multifamily share of housing production hovered at roughly 20%, or one in five home starts.

Jump years ahead to today, and the latest multifamily share of production is up 33% and accounts for one in three homes.

The same analysts concede that with this higher multifamily share trend remaining for years now, a new “equilibrium” has apparently been reached.

Related Articles

Kerri Ann Panchuk was the Online Editor of HousingWire.com, and regular contributor to HousingWire magazine. Kerri joined HousingWire as a Reporter in early 2011 and since earned a law degree from Southern Methodist University. She previously worked at the Dallas Business Journal.

This month inHousingWire magazine

The appraisal industry is in the midst of huge disruption as automated valuation models and hybrid appraisal products gain favor with regulators and investors. What does the future hold for appraisers and appraisal companies as they adjust to the new realities of automation?

Feature

[Free HousingWire Magazine read] As Millennials grapple with paying off student loans, their opportunity to buy a home gets pushed further and further into the future. That delay has consequences far beyond individual students — the growing student debt crisis impacts every part of the economy.

Commentary

There has been a conscious and rapid shift to broaden the use of alternative valuation products for origination. Not every decision needs a $500, full-blown 1004 interior appraisal. And in some markets where appraisers are short in number, the turn times can stretch from days to weeks. What these new alternative — some would say disruptive — valuation products do is enable lenders and servicers to better match the product to the risk by harnessing big data and technology.